Asia Markets recap: It’s double downbeat data day

February 19, 2014, 7:25 PM ET

Reuters

Welcome to the Asia Markets live blog, a running account of what the region’s stock markets are doing, along with other news. Today, Japan posts its widest trade deficit in history as export growth underwhelms, while HSBC’s early China manufacturing report prints painfully weak.

The stocks are up in Sydney, with the latest earnings results again proving more of a boost than a drag.

The ASX 200 is currently up 0.2%.

Among Thursday’s earnings-driven movers: AMP is up 7.1%, Leighton Holdings is up 6.6%, and Fairfax is way up 22%. But poor Origin Energy is down 2.1%, though it’s still a bit over 3% higher for the year to date.

But regardless of these early moves, the market may dance to China’s tune once HSBC unveils the early results from its monthly Chinese manufacturing survey later this morning.

Investors in Japanese stocks are still chipping away at that 3.1% rally the market posted two days ago. The Nikkei Stock Average nearly an hour into Thursday trading was down 0.7%. A loss today would build on Wednesday’s pullback of 0.5%.

The session opened with downbeat domestic trade data, which came on top of figures earlier in the day showing a bigger-than-expected decline in U.S. home construction last month. Coming up later in the session: a preliminary monthly reading of the Chinese manufacturing sector from HSBC.

What with the weak yen and a costly energy bill, January imports grew 25% (from a year earlier) just as they did in December. Exports, however, slowed to a 9.5% increase after bounding more than 15% higher the previous month, missing a 12.5% forecast rise.

The result: Japan’s trade gap ballooned to ¥2.79 trillion ($27.2 billion) from December’s ¥1.30 trillion, the largest in the data set’s history.

Noting that weakness in the trade account ate about half a point from Japanese GDP in the last two quarters of 2013, Capital Economics said the future doesn’t look so bright:

“With domestic demand surging ahead of the consumption-tax hike, the monthly numbers may get worse before they get better,” they said, referring to purchases of imported good ahead of April’s planned increase in the national sales tax.

But wasn’t it all seasonal? No, says Capital Economics: ”While the deficit tends to surge in January for seasonal reasons, the seasonally adjusted trade deficit reached a record high as well.”

The yen wasn’t quite sure what to do with the news. First it fell, with the dollar rising to ¥102.40 from ¥102.30 pre-data, but now the greenback is down to ¥102.24. Not huge moves in any case, and certainly related to the current losses for Japanese equities.

The headline number for the February Purchasing Managers’ Index was at a seven-month low of 48.3. A Bloomberg survey showed economists expecting the index to hold steady at 49.5, which is still below 50 (meaning a contraction).

Meanwhile, the closely watched subindex measuring employment in the sector marked the fastest contraction since 2009. (Read more details here.)

Markets did not like this, not one bit. Hong Kong’s Hang Seng is now down 1.4% after showing a slim 0.1% gain ahead of the numbers. The Shanghai Composite, which was up a bullish 1.5%, is now up just 0.1% and falling. The Australian dollar lost about half a U.S. cent within minutes. (See more on early China stock trade here.)

Among early reaction to the numbers, Kim Eng Securities strategist Andrew Sullivan urged a bit of caution:

“We need to remember that there is still an element of the Chinese New Year playing out here. This is the flash number and the final number comes out on March 3,” he wrote.

PNC senior international economist Bill Adams said that the report, bad as it looks, isn’t much worse than what we saw last year:

“The level of the HSBC manufacturing PMI is close to where it spent much of 2013, a year in which real GDP growth averaged 7.7%. After an above-trend fourth quarter of 2013, real GDP growth is likely slowing in early 2014, in line with a year of real GDP growth of about 7.5%,” he wrote.

After the preliminariy reading of China manufacturing data from HSBC spooked investors, the market got hit by another piece of news: China’s central bank drained more funds from the system.

The People’s Bank of China on Thursday morning withdrew another 60 billion yuan ($9.9 billion) from money markets through bond repurchases, reported Xinhua08.com, a financial-services site run by state news agency Xinhua.

The monetary authrotiy has already sucked $17.8 billion out of the banking system this week, aiming to “balance the abundant liquidity” due to a backflow of funds after the weeklong Lunar New Year holiday, Xinhua08 said.

The decline, combined with Wednesday’s loss, nearly erases the index’s leap of 3.1% it logged on Tuesday.

Earlier, Japanese government data showed exports in January rose by a slower-than-expected rate of 9.5% from a year earlier, and the trade gap widened to a record ¥2.79 trillion ($27.2 billion). Meanwhile, contraction in China’s manufacturing sector “is reminder that China is unlikely to power Japanese exports,” in the first half of this year, said HSBC Japan economist Izumi Devalier in a note.

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